Table of Contents
WHAT IS FISCAL DEFICIT?
- The difference between total revenue and total expenditure of the government is called as fiscal deficit.
- REVENUE DEFICIT?
WHAT DO YOU MEAN BY FISCAL DEFICIT AT 5% OF GDP?
- If the gap between the Centre’s expenditure and total income is Rs 5 lakh crore.
- And the country’s GDP is Rs 100 lakh crore, The fiscal deficit is 5% of the GDP.
HOW IS FISCAL DEFICIT MET?
- The government meets fiscal deficit by borrowing money.
- Thus, Total borrowing = Fiscal deficit in that year
CONTEXT
- Fiscal deficit was just 3.4% of GDP for 2018-19.
- For the current year, the Union Budget presented in July expected the fiscal deficit to be 3.3% of the GDP.
- However, for long, it has been suspected that the official figures hide the true fiscal deficit.
- Now, former Economic Affairs Secretary S C Garg has stated that, The actual fiscal deficit is likely to range between 4.5% to 5% of GDP
WHY THERE IS DIFFERENCE?
- All government expenditure, revenues and debts are required to be carried out through the Consolidated Fund of India (CFI).
- Unfortunately, all these transactions are not recorded through the CFI all the time.
- Some debt/liabilities are totally outside the formal accounting system of the Government i.e. outside CFI and Public Account.
- Such transactions are described popularly as Below the Line, Off Budget
EXAMPLES?
- Equity infusion in the Public Sector Banks (PSBs), has been done during last few years.
- This was done through issuing of Recapitalisation Bonds outside the consolidated fund account.
- The government has also been paying off food subsidy liability by providing cash from-
- National Small Savings Fund (NSSF).
IS IT 1ST TIME SUCH THINGS HAPPENING?
- During 2004-09, Bonds were issued to Oil Companies and Fertiliser Companies.
- They were accounted in the Public Account (instead of CFI).
- According to Garg, There is likely to be a shortfall of- Rs 2.25 lakh crore to Rs 2.5 lakh crore.
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